Home offices and tax breaks - here is what you need to know

A large number of South Africans have set-up home offices since the start of the lockdown and with regulations in place advising many to continue working from home, we take a look at what effect this will have on tax submissions.

Under South African tax rules, the cost of working from home is an expense you can offset against the money you earn by doing so. However, before you submit you will have to make sure you have all the documentation in place as those who submit claims for a home office will be audited.

This according to Rhoda Kirsten, tax specialist, and owner of Brenley Accountants who further explains that you will need a Code 3713 on your IRP5. This is for Other Allowances and should be requested as not many business owners add this automatically.

“Some of our clients have already taken the initiative to add this to their employees IRP5’s, but it is not commonplace yet, therefore employees must request this to be added,” she says.

“A letter stating that you had to work from home for the financial year, or part thereof, from your employer, is also needed for your submission,” she adds. Additionally, all receipts pertaining to the setup and maintenance of your home office along with your bank statements should be kept and added to your submission. “This is very important,” she says “as mentioned before SARS will audit those who submit claims for a home office, and having everything in place will prevent any issues.”

Don’t have a dedicated room or study that you use as a home office? Submitting a tax claim when you just have a workspace set up in your living room is possible but will require you to only claim for the square meters used. For example, if your home is 165m² and you worked from your living room that is 29m², you will be able to claim 18%. 

“You must disclose the area or space that you are working from when submitting,” she says. “It is also very important to understand that this is different for sole proprietors or freelancers who also work from home.”

She breaks down the conditions under which you claim for a home office:

What constitutes home office expenditure? 

Typically, home office expenditure will be the type of expense referred to in section 23(b), namely:

  • rent of the premises; 
  • interest on bond; 
  • cost of repairs to the premises; and 
  • other expenses in connection with the premises. 

In addition to these expenses, other typical home office expenditure may include:

  • phone, cellphones and internet; 
  • stationery; 
  • rates and taxes;  
  • cleaning (cleaning lady) & gardening service; 
  • office equipment; and 
  • wear-and-tear

 “Employees can deduct their home office expenses within the “Other Deductions” section of the ITR12 form,” she says.

“Working with a knowledgeable tax practitioner will definitely make the process a lot less frustrating and will also allow you to reap the benefits of being tax compliant,” concludes Kirsten.

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